How do non-management members of an EB-5 investment meet day-to-day management requirements?

Under the direct investment model stipulated in the EB-5 program, does my role as a non-managing member of a new commercial enterprise organized as an LLC suffice to meet the day-to-day management requirements? How do non-management members of an EB-5 investment meet day-to-day management requirements?

Answers

An EB-5 investor needs to have an active management role that may include day-to-day management duties. However, if you have voting rights and a say in policy formulation, you can also meet the active management role requirement. That is, day-to-day management can show you meet the active management requirement, but there are other options that do not include day-to-day management.

You would need to look at your LLC operating agreement to determine if you have a policy-making role in the company. You must either be actively engaged in day-to-day operations or be in a policy-making role/be able to vote on major decisions such as change in business purpose, liquidation, etc.

8 C.F.R. 204.6(j)(5)(iii) states in part: “For purposes of this section, if the petitioner is a limited partner and the limited partnership agreement provides the petitioner with certain rights, powers, and duties normally granted to limited partners under the Uniform Limited Partnership Act, the petitioner will be considered sufficiently engaged in the management of the new commercial enterprise. Like limited partnerships and corporations, a limited liability company (LLC) is recognized as a legal entity separate and apart from its members. However, unlike in a limited partnership in which the participation of limited partners in the management of a limited partnership can result in a loss of limited liability protection for that limited partner, there is no similar restriction on the ability of LLC member to participate in the management and of the LLC. All LLC members can participate in the management and control of the LLC, as members or as managers.” You should closely review the LLC’s operating agreement. It generally provides non-managing members with authority to make high-level policy decisions that comports with the rights, powers, and privileges normally granted to LLC members under the Limited Liability Act. In addition, non-managing members will also be involved in the policymaking and procedural outlining of the LLC. For example, members generally have the right to participate in the management and conduct of LLC business and to bind it in the ordinary course of its business. For another example, the non-managing members will have power to take action relating to the business or affairs of the LLC and may participate in any meeting by written proxy or by any means of reasonable communication and take action in approving of material changes to rights of LLC members and dissolution of the company. For another example, the non-managing members are usually granted with authority to lend money to, borrow money from, act as surety, guarantor or endorser fore, guarantee or assume obligations, provide collaterals and transact business with the limited liability company. Moreover, the members are usually granted power to vote on the LLC’s future creation and establishment of additional company groups and structures and on establishing and limiting the rights, duties, and powers of existing classes or groups of members.

The most recent USCIS policy memorandum states the EB-5 investor has to play a managerial role either in day-to-day operations and/or have a say in policy decisions and/or playing a role on the board of directors.

The EB-5 regulations require that the investor be involved in the management of the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formation. Therefore, if the investor is involved in policy formation, it is not necessary that the investor also show that he or she will exercise day-to-day managerial control of the new commercial enterprise.

The statute requires the investor "actively participate in the investment," as they describe it as the same participation as a Limited Partner would have under the Uniform Partnership Act. I would check on the regulation from LLC''s in the state where you form it to see what they require as rights and duties of members.

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